BUSINESS MAVERICK

UIF has R30bn available for Covid-19 income support to laid-off workers

By Ray Mahlaka 1 April 2020
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(Photo: Adobestock)

The Unemployment Insurance Fund and the Department of Employment and Labour have launched the new Covid-19 temporary employee relief scheme, which will provide funds to distressed companies unable to pay the full salaries of workers they permanently laid off or sent home temporarily due to Covid-19 and the shutdown.

From April, the government is bracing for an influx of laid-off workers that will look for aid from the Unemployment Insurance Fund (UIF) due to the economic fallout of the Covid-19 pandemic and resultant 21-day national shutdown. 

About R30-billion has been provisionally earmarked for the new disaster UIF scheme that will assist workers who have been affected by the shutdown across several sectors of the economy to contain the spread of Covid-19. 

The UIF, whose operations are overseen by the Department of Employment and Labour, will be the main mechanism with which the government will ease the economic burden of the shutdown on workers and employers. 

To do this, the UIF and the department have launched the new Covid-19 temporary employee relief scheme (Ters), which will provide income support to workers who have been temporarily or permanently sent home due to the Covid-19 outbreak. 

Makhosonke Buthelezi, the UIF’s communication and marketing manager, said actuaries have determined that the UIF has R30-billion that hasn’t been committed to liabilities, which can be diverted to Ters. The UIF’s liabilities are annual and limited benefits it pays to workers who claim for being unemployed, ill, pregnant or have exhausted their paid sick leave.

“There is no exact amount set aside [for the Ters Covid-19 benefit]. But when our actuaries checked what we have in a kitty that is not committed to any liability at this moment, they gave us an estimate of around R30-billion,” Buthelezi told Business Maverick

UIF firepower

Arguably, the UIF can set aside more funds, with its former director saying the R30-billion would be a “hopeless underestimate as it is less than the actual money the UIF has because they don’t usually have high liabilities”. The UIF’s liabilities are not long-term in nature and are linked to individual claims for a particular year. The former director said in a normal year, the UIF’s liabilities don’t exceed R20-billion. 

Lending credence to the director’s views about the UIF having the firepower to set aside more than R30-billion is that the National Treasury expects the UIF to have an average surplus of R3.6-billion over the next three years. This is in addition to the UIF having investments worth about R160-billion (after liabilities of about R20-billion) on the JSE and bond market that are managed by the Public Investment Corporation, a state-owned asset manager. But the value of the UIF’s investments (R160-billion) is probably outdated considering the volatility of financial and bond markets in recent weeks due to Covid-19 that has probably reduced the intrinsic value of its investments.

More claims 

An unexpected health crisis such as Covid-19 might make it an unusual year for the UIF as it might face higher liabilities (or claims). Employment and labour minister Thulas Nxesi said in recent weeks that the UIF received 7,000 claims from individual workers as SA faced more Covid-19 infections.

He expects that number to swell because the new Covid-19 temporary employee relief scheme (Ters) will dispense income support to laid-off workers from the month of April – not March. 

“The relief that UIF is giving is for the month of April – (coinciding mostly with) the 21-day shutdown pronounced by the president… Employers should have by now paid the March salaries minus the four days (in March from when the shutdown started on the 27th),” Nxesi said during an interministerial media briefing on Covid-19 on Tuesday 31 March. 

Considering that the UIF’s relief measures are only effective from April, state-owned airline SA Express has been put in an awkward position because it has approached the UIF for assistance to pay outstanding March salaries. SA Express cannot pay March salaries because it has completely run out of cash.

Employees who are either retrenched, unemployed or have exhausted their paid sick leave, usually receive – under normal UIF benefits – half, or even less than that, of their salary for 12 months. The same rule is expected to apply to Ters. 

The administration of the UIF is widely known to be poor as it is beset by long delays in processing claims from when they are received. This will be the true test for the effectiveness of the UIF’s Covid-19 support measures in the next weeks. 

Nxesi said UIF labour centres around SA could not deal with the “millions of individual claims” from workers during the shutdown period as it would lead to delays in processing them. To avert this, he said the government has “put in place systems to pay out UIF benefits through companies, sectoral associations and bargaining councils”. 

This is a step away from the normal practice of a large number of workers individually submitting claims. BM

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